7½ reasons why your team needs automated reconciliation software

7½ reasons why your team needs automated reconciliation software
Ledge Team
May 8, 2023
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Automated reconciliation software is the best thing that’s happened to finance teams since the invention of the calculator. Hyperbole? We don’t think so.

Just like doing the dishes or watering the plants, reconciliation is one of those routine, core functions that you just gotta do. Though unglamorous, it’s mission-critical work that ensures that a company has accurate financial records, which every business needs to properly operate, function, and grow. 

But as the adoption of digital payments has skyrocketed and payment volumes have dramatically increased, reconciliation has become a Herculean endeavor for many finance teams operating at scale.

If your finance team is handling a high volume of payments and a complex payment stack of multiple payment processors, ERPs, banks, and databases, here are 7 (and a half!) compelling reasons why you should ditch manual reconciliation ASAP in favor of automated reconciliation software.

1. Stop wasting time on all the transactions that match 

Here’s the thing with manual reconciliation – around 95% of transactions match without issue. That means that finance teams are toiling over non-issues when they could and should be spending their precious time focusing on other more strategic tasks.

That’s because manual reconciliation can be a beast. It involves downloading and collecting all bank statements, financial documents, and invoices, compiling them into a spreadsheet, and then using the Excel prowess you have to run VBA scripts and VLOOKUPs to automatically match as much as possible before you’re forced to inspect individual transactions line by line to ensure that all records match. Any discrepancies you find then need to be investigated and resolved.

Manual reconciliation may be doable when you’re dealing with dozens or even hundreds of transactions, but it becomes untenable as your company grows and starts processing thousands of payments. (Excel’s computing power only goes so far. And trust us, Excel has a last line, we’ve seen it.) 

It’s little wonder, then, that finance teams report that they spend 40% of their time processing transactions and 64% of finance teams report that manual processes are their largest financial close challenge.

2. Identify discrepancies fast to minimize losses

Time is of the essence when identifying discrepancies and performing investigations. Strict timeframes usually must be adhered to before it’s too late to rectify a payment error. 

If a business makes a wire transfer by mistake – which can and does happen, sometimes to the tune of $900 million, if you’re CitiGroup – it must act immediately to try to cancel or recall the transfer. Years later, CitiGroup is still in a protracted legal battle against Revlon trying to recoup the money from that exorbitant clerical error.

And sometimes it’s not an honest mistake – the Association of Certified Fraud Examiners (ACFE) estimates that the typical organization loses 5% of revenue to fraud each year.

Teams drowning in manual reconciliation simply don’t have the same time and attention to devote to investigations – or worse, might miss the discrepancies completely. That translates to a direct hit to the P&L. 

Regardless of the cause of the discrepancy, automated reconciliation software gives finance teams the mindshare, time, and resources to focus on investigating and reconciling discrepancies with speed and precision in order to minimize losses.

3. Have the confidence that your data is accurate

To err is human, and finance teams doing reconciliation manually in spreadsheets are bound to make mistakes. 

It’s often quoted that 90% of spreadsheets contain errors, and whether or not that’s an exaggeration, it is true that many finance teams are acutely aware of their own mistakes. In fact, only 38% of finance professionals trust the accuracy of their own data. 

And for finance teams handling a high volume of payments from a complex payments stack, merging different data sets into a single spreadsheet and trying to normalize the data into one structure, the likelihood of making mistakes during manual reconciliation is that much higher.

That’s why automated reconciliation software that can handle a wide range of digital payment sources and a high volume of payments is essential for finance teams that are operating at scale. Without accurate data, teams cannot make informed decisions, mitigate risk, or budget and plan for the future.

4. Don’t scramble when it’s time for audits

Whether you’re raising a funding round or preparing for an IPO, audits are an inevitable part of life for both public and private businesses, ensuring that the business is in full compliance with regulatory requirements and standards. 

Given that the audit involves a detailed review of a company’s internal records, including accounting and financial transactions, it is impossible for companies to prepare for or pass an audit without regular and thorough reconciliations.

We’ve heard countless stories of companies that have had to delay an IPO simply because their books and finances weren’t in order and needed to hire outside consultants to help with months and maybe years of reconciliation work.

When automated reconciliation software is implemented early, it makes audit readiness a breeze. Companies can avoid crises like these and sail through audits with the confidence that their accounting is buttoned up and in order.

5.  Make your team happier

It’s no secret that finance teams have a problem – headline after headline after headline report a severe accountant shortage, which poses a critical risk to companies as their payments and transactions only grow increasingly more complex.

Modern finance teams must have automated reconciliation software in their arsenal, not only to combat this labor shortage, but also to make their positions more attractive to the smaller pool of candidates that do still exist.

Business Insider writes, “Thinking of the [accounting] profession often conjures up images of number crunchers with mountains of paperwork and endless data entry, when in reality, much of these mundane-sounding tasks have since been automated.”

While that may be true for companies handling a simple payments stack, the movement towards automation has neglected teams that are handling a high volume of payments and complex stacks, leaving these teams to figure it out on their own (usually manually.)

Reconciliation is a core finance function that’s not going anywhere, but with the right automated reconciliation software in place, teams won’t be overwhelmingly burdened by it, either. That will give them the time and energy to focus on more strategic and fulfilling work like analysis and data visualization.

why you need automated reconciliation software

6. Scale with confidence

Growing pains are inevitable as a company grows – everything from having large enough office space to fielding support inquiries can feel like a game of catch-up. While finance isn’t immune to challenges, it’s critical to implement strong systems as early as possible.

As your company grows, you can scale your finance team, but humans only scale linearly, while a high volume of payments across a complex stack increases the workload exponentially. Continuing to add more payment options and systems is critical to a company’s success, but paradoxically, it can make finance teams victims of their own company’s good fortune.

Businesses looking towards the future would be wise to implement finance systems early on before things get really complex, and automated reconciliation software can enable them to scale effortlessly and efficiently as the business grows.

7. Build trust with your customers

As technical and ordinary as reconciliation may sound, getting it right is mission-critical to building trust with your customers. Few things are as sensitive as money, and when companies mess up with payments and transactions – or worse, can’t quickly act to rectify it – it can do a lot of damage to hard-earned customer relationships.

We recently spoke to a Chief Accounting Officer of a large enterprise who said that adopting automated reconciliation software was a top priority across the organization, especially at the executive level, due to the strain that payments correction research has had on client relationships: 

“We need better accountability to our clients – we’re processing billions of dollars on their behalf every year.”

That’s why implementing robust automated reconciliation software is not just a strategic finance move, but is also critical to every department across the company, from sales to marketing to customer success.

7 ½. Sleep better at night

This may not be the official reason you present to the board when explaining that you’ve implemented automated reconciliation software, but your peace of mind is no laughing matter. 

Some finance executives we’ve spoken to say that their reconciliation problems literally keep them up at night – the lack of visibility, their lack of control, and the real risk of significant losses.

Reconciliation is something that you’re expected to get right – it’s not something you get a gold star for doing well, but you’ll definitely be held accountable if money goes missing on your watch. Finance teams in this position need tools to help them tame the chaos of payments and be independent, productive, strategic contributors to business growth.

Why you need automated multi-way reconciliation software

Automated reconciliation tools do exist, but most of them are for non-complex payment stacks and do two-sided reconciliation between a company’s bank and internal database or ERP. While this might be sufficient for smaller teams handling low volumes of payments, it simply won’t cut it once a company scales.

Many businesses today need a powerful reconciliation engine that can automatically match transactions across a wide spectrum of banks, payment providers, ERPs, billing systems, databases, and yes, even Excel sheets.

Smart multi-way transaction matching in automated reconciliation software solves the pain of reconciliation for businesses operating at scale and turns these payments into power.

We're on a mission to automate and simplify finance operations for teams working at scale.

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